By Anna Stablum
LONDON (Reuters) - High commodity prices are fuelling metal and mineral exploration budgets across the globe but resource-rich Africa stands out as a jewel.
"We are targeting more exploration investment in Africa than any other region around the globe," the world's largest mining firm BHP Billiton told Reuters in an email.
The Australian giant plans to spend $800 million on exploration this year, in line with 2006, and next year expects to increase its exploration spend to $1.2 billion.
BHP Billiton is not alone searching for resources in farflung places that until recently were too risky to explore.
"Overall, the gold-mining industry is tending to go to emerging and undeveloped countries as discoveries are scarce," the world's largest gold producer Barrick Gold said.
In 2007 Barrick expects to invest about $185 million in exploration, up slightly from 2006, the firm said in an email.
The International Finance Corporation, the private financing arm of the World Bank, will spend 75 to 80 percent of this year's investments in the mining sector on projects in Africa.
The IFC's mining division specialises in financing mining projects and assists companies investing in developing countries to spur economic growth.
"We are beginning to see a total convergence in the sort of objectives that we have as a development bank to those of successful mining companies," senior manager William Bulmer of IFC's mining division told Reuters.
He said the institution expects clear development benefits to come out of projects that are successfully executed.
"Our commitment now is very much for growth in terms of IFC's role in the sector," Bulmer said.
ADDITIONAL RISKS
Bulmer said mining firms faced additional risks when moving into these markets whether it was political, environmental or social and community issues.
"This is why, quite frankly, IFC is often partnering with these large companies, because they certainly don't need our money, it is to bring in this type of assistance," Bulmer said.
Over the past few years mine project investments had been fairly modest, at around $300 million of FDI, "but we expect that to increase significantly", he added.
In 2007 IFC's expected mining portfolio budget amounted to $567.5 million, while money raised from commercial banks or B-loans totalled $50 million. This is up from $393.4 million and B-loans of $25 million in 2003. [ID:nL16481166]
One recent IFC investment is a $5 million equity stake in Rio Tinto's iron ore project in Guinea.
The world's second largest diversified miner, Rio Tinto, spent $194 million in the first half of 2007 on exploration, up from $113 million during the same period of 2006.
Africa benefitted from 16 percent of its exploration budget.
"We have increased our focus on Africa...We are looking to develop a number of projects in different parts of Africa," Rio Tinto's spokesman told Reuters.
In Africa total FDI inflows in the extractive industries, including oil and natural gas, exceeded their previous record set in 2005/ At $36 billion it was twice the 2004 level, the World Investment Report 2007 by the United Nations said.
High commodity prices and buoyant demand from emerging economies, mainly in Asia, fuelled inflows, the report said.
Nonetheless, Australia and North America remained unchallenged as the world's most important mining regions.
The majority of Rio Tinto's assets are in Australia at 55 percent, 18 percent in the United States, 12 percent in Canada, 6 percent in South America and only 4 percent in Africa.
The same goes for the majority of FDI inflows in extractive industries going to developed countries in 2006, mainly because of significant cross-border merger and acquisition activity.
But the trend points to developing and transition economies taking a larger share of investments in extractive industries, the United Nation's UNCTAD) report said.
In total global private investment in non-ferrous metal exploration increased to $7 billion dollar in 2006, up from $2 billion in 2002, the report added.
